The “Marginal Standing Facility” is a window for banks to borrow funds from the Reserve Bank of India at
[amp_mcq option1=”the repo rate” option2=”a rate lower than the repo rate” option3=”a rate higher than the repo rate” option4=”zero interest rate” correct=”option3″]
This question was previously asked in
UPSC Combined Section Officer – 2021-22
The correct answer is C. The Marginal Standing Facility (MSF) rate is higher than the repo rate.
The Marginal Standing Facility (MSF) is a facility under which scheduled commercial banks can borrow additional funds overnight from the Reserve Bank of India (RBI) by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit. It was introduced as a safety valve against unanticipated liquidity shocks. The rate charged under MSF is a penal rate, typically higher than the prevailing repo rate.